AT&T, Honeywell to challenge Gogo's airborne Web business

The AT&T logo is pictured by its store in Carlsbad, California, April 22, 2013.Mike Blake/Files

SEATTLE (Reuters) - AT&T Inc and Honeywell International Inc are teaming up to offer high-speed, in-flight Internet in the United States, the companies said on Monday, challenging industry leader Gogo Inc.

GoGo shares fell 14 percent in after-hours trading following the announcement of the new service, expected by late 2015. It will use an AT&T 4G LTE network and Honeywell systems and hardware to supply broadband service to business, commercial and general aviation passengers, as well as to airlines seeking more connectivity onboard planes.

Honeywell said the deal could provide it with $1 billion in revenue over the next decade. AT&T declined to estimate potential revenue from the agreement.

The two companies have signed a letter of intent and expect to sign a formal contract shortly, Honeywell said. Gogo Inc currently provides similar cellular network-based technology, known as air-to-ground, that is in use on about 80 percent of wired commercial aircraft in the United States, including Delta Air Lines and the newly merged American Airlines.

After Gogo shares fell sharply, Chief Executive Mike Small said in an interview: "I think it went the wrong direction." He noted that Gogo pioneered the air-to-ground system over the last 20 years.

"We have a great business and everybody wants in," he said.

GoGo recently announced a satellite-based system that offers connectivity over water and uses a dual antenna capable of providing speeds of up to 70 megabits per second, compared with its current air-to-ground service speed of 9.8 mbps in the U.S. Honeywell said the AT&T system would have greater speed and bandwidth than existing systems, but did not provide approximate data speeds for the 4G system.

AT&T said the airborne WiFi fits its strategy of adding connectivity to a wide range of applications, from cars to automation in homes. The company has about 116 million subscribers in the United States.

The AT&T-Honeywell deal comes as a number of in-flight internet options are being rolled out, many based on Ka band or Ku band satellite spectrum. The systems promise faster speeds and wider application, at lower cost. But they also have made it difficult for airlines to choose among competing technologies, and the cost of equipping a fleet can cost hundreds of millions of dollars.

Better connectivity would allow more communication with pilots and crew members and the plane's diagnostic systems, providing real-time weather tracking, and status reports on aircraft parts. With improved and less costly connectivity, a plane could send more alerts about parts that might be close to failure, enabling ground crews to have spares ready when the aircraft lands.

Greater connectivity also would help in tracking jets, That is a priority as the search continues for Malaysia Airlines flight MH370, which vanished from radar screens on March 8 with 239 people aboard. The wreckage has still not been located.

Reporting by Alwyn Scott; Editing by Steve Orlofsky and David Gregorio